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Flooring Retailers & Area Rugs

By Jessica Chevalier

For flooring retailers, the key to a successful area rug program is simple: knowing the tastes, needs and buying habits of their customers. While styling certainly plays an important role in the sale of all types of flooring—both hard and soft—for many consumers an area rug is akin to a piece of art, a finishing touch, emblematic of their style and personality. Retailers can’t toss a stack of rugs in an empty spot and expect them to sell. They must offer a collection that appeals to tastes of consumers and is large enough to establish them as a go-to source for area rugs.

OPTIMIZING INVENTORYUnderstanding the styling preferences of the customer base is vital. Stocking an inventory of area rugs to display in a flooring showroom is an expensive undertaking, and mistakes can be costly, both financially and due to the loss of floor space that could have been devoted to salable items. However, with a gross margin of almost 50%, they also offer a great deal of opportunity for dealers who target their market correctly.

In selecting an inventory of area rugs for a store, retailers must remember that the customer’s taste may not be their own. While a store with a large selection of rugs, such as Marshall’s Carpet One and Rug Gallery in Mayfield Heights, Ohio, which has an inventory of almost 1,000 rugs in its showroom, may have something to fit every taste, a store with a smaller inventory, such as Dalton Wholesale Floors in Jasper, Georgia, which has an inventory of 120 rugs, must make sure that it is stocking designs that appeal to the aesthetic of the customers.

Dalton Wholesale Floors is situated in a mountain community and many of its customers reside in one of the two gated communities in the area, the homes within which are largely inhabited by mature residents with traditional tastes. Of buying for his customers, partner Chan Ross says, “I found out the hard way. This is the hardest thing in the rug industry, not buying what you like but what the customers do.” In addition to the traditional looks, some of his customers, for whom the Jasper homes are often weekend residences, like lodge-look rugs. Indoor-outdoor rugs are also very popular because the homes, which range from $200,000 to $2 million, are constructed with numerous porches and outdoor spaces.

Cheri Chinnici, category manager for rugs at Crest Flooring, has had a similar experience. There is a large population of Pennsylvania Dutch that shops in the Allentown store, and braided rugs are popular with this group. For this reason, Crest stocks this style, which has ebbed in popularity among the greater population. Braided rugs don’t account for the bulk of her sales, but sales are significant enough to warrant a sizable representation.

“Styling is a very regional things,” says Steve Glassman, partner at Marshall’s and head of its rug gallery. “I have a rug that is a long, heavy, handmade shag. It’s our most popular style, and it has been for five years. I sell one or two a week, and it’s higher priced.”

It’s equally important for retailers to find their niche and stick with it. “If someone wants something nice in Cleveland, they come to us,” says Glassman.

Ross agrees, adding, “If I let stock dwindle, sales dwindle. You have to really be ‘in the rug business’ to be in the rug business.”

SELLING STRATEGIESMarshall Carpet was started in 1966 by Marshall Wein. Soon after, Wein’s sons took over the business. Glassman was a restaurateur with five locations in the Cleveland area when, years later, his friend Mark, one of Wein’s sons, came to him to discuss his prediction that area rugs were a great business opportunity because of the dramatic increase he was seeing in hard surface sales. And so, in the early ’90s, Glassman sold his restaurants and opened Marshall Rug Gallery directly across the street from Marshall Carpet.

However, it turned out that customers didn’t like traipsing across the street to buy their rugs, so the team soon began looking for a location that could house both arms of the business. In April 2010, they opened Marshall Carpet One and Rug Gallery in a 17,000 square foot location in a strip center, only a five-minute drive from their former location. Rent for the single larger space is less than they were paying for two spaces, and the rug business in the new location is up 30% over what it was. In addition, Glassman reports, “We have sold more expensive rugs (over $10,000) in the last three years than we ever did in the other store.” In the new showroom, one third of the floor space is devoted to broadloom, one third to hard surface and one third to area rugs. All employees are trained in all flooring categories.

Marshall sells every style of area rug, from machine-made synthetics to fine hand-knotted pieces, at price points that start at $299 for a 5’x7’. The average 5’x7’ sells for close to $1,000. The most expensive rug the store has ever sold was a 12’x18’ for $28,000.

The bulk of Marshall’s rugs are displayed in wall racks, which line a 130-foot wall on one side of the store. Smaller racks are used as well, and the store has 850 samples of continuous roll runners, which account for a huge part of the business, according to Glassman.

Marshall has a 48-hour loan policy, which Glassman describes as “the backbone of our salesmanship.” Eighty percent of sales are made after people have borrowed a rug and taken it home. In the 20 years that Marshall’s has been loaning rugs out, it’s had only one or two incidents where the rugs came back in poor condition. Glassman recalls, “One guy borrowed two $3,000 rugs and brought them back trashed. He lived in my housing development, so I’d seen all the cars in front of his house and knew he had a party. We keep credit card numbers on file, so we just charged him for the cleaning. There aren’t nearly as many problems with loaning rugs as you’d think. It’s a great selling tool.”

As with Marshall’s, Crest Wholesale Carpet & Flooring, a 60-year-old flooring retailer in Allentown, Pennsylvania, allows customers to borrow rugs with an authorization on their credit card. Since the store is closed on Sundays, it encourages customers to take the rugs home over the weekend, generally for two to three days, to live with the pieces for a bit. Chinnici reports few problems with loaning rugs in the 23 years that Crest’s area rug showplace has been in business.

One great advantage that flooring retailers have over area rug-only specialists is the opportunity to pair hard surface and area rug sales. Says Glassman, “Many customers buy hardwood and rugs in the same sale. If you buy hard surface flooring, that gets you 20% off any rug.” If customers don’t buy a rug when they purchase their hard surface flooring, oftentimes they will come back later and do so.

The same is true at Dalton Wholesale Floors, “Within seven to ten days, the customer who buys hard surface will buy a rug, and flooring retailers are missing the boat if they can’t make that sale,” says Ross. Dalton Wholesale also offers a discount on an area rug to those who have purchased hard surface. The Dalton Wholesale location in Jasper is a 29,000 square foot facility, and the focal point of the store at the entry is area rugs. Says Ross, “If they are here buying hard surface, at some point they will walk over and flip through the rugs.”

Ross and his partners acquired the Jasper store in July 2012. The location was an existing store that was going out of business. Much of the inventory was gone by the time Ross and his partners made the deal, but there were several area rug racks in the showroom, so the team knew that they had been an important part of sales. In choosing inventory, however, they were starting from scratch, as only a few rugs remained. “As soon as I started putting rugs in the store, they started walking out the door. I added two more racks, for a total of five.” Dalton Wholesale Floors has two other locations, but the Jasper location sells more rugs than either of the other stores.

In addition to carrying rugs from Kas, Shaw, Orian, United Weavers and Surya, Dalton Wholesale has broadloom bound and serged to make area rugs, and the prices on these are sometimes more affordable than traditional area rugs, especially since Ross is within close proximity to Dalton, Georgia and can pick up orders himself. Dalton Wholesale’s rugs range from $89 to $1,000 in a 5’x7’, though the meat of what they sell is from $200 to $600.

Ross instructs his employees to talk with the customers about their wants and to remind them that what’s offered on the show floor isn’t the limit to what Dalton Wholesale can supply, “They are instructed to tell the customer, ‘If you’re looking for a big rug, but see something that you like in a 5’x7’, know that we can probably get it bigger or in a round or whatever.’ You can’t assume that the customer knows that.”

Often, customers will resist the idea of selecting an area rug when they purchase hard surface flooring. Says Chinnici, “We started selling hardwood about ten years ago. Customers didn’t want to cover it up, even for a 10% off discount. They have to live with it.” After it’s installed, reports Chinnici, it doesn’t take them long to see the area rug as an accent to their hard surface purchase.

Crest limits its vendors so that it purchases more from each and, as a result, receives discounts, which it passes along to customers. The company buys from Oriental Weavers, Dalyn, Karastan and Shaw, and carries roll runners from Radici. Most of its price points are in the mid range, though it does carry some higher priced area rugs. “We do not carry hand-knotted rugs, which are generally more expensive than machine made.”

Crest’s rug area is a space off the main showroom with four racks, along with three racks of runner samples. The location is spacious and uncluttered, set off from the store. The company employs a good/better/best system for area rug purchases, as a tool to move customers toward better-end goods.

THE COMPETITIONChinnici reports that today’s customers are very price conscious and that Crest’s area rug department often gets “shopped,” meaning that customers come in to see and touch items that they have seen online, and may later buy online. In her estimation, the recession still has a hold on the consumer’s wallet, and customers are unwilling to spend any more than they were a few years ago. Early on, says Chinnici, when online sales of rugs became popular, consumers came in asking them to match prices, which the company does not do. She believes that online shopping for area rugs has “calmed down quite a bit,” since it’s impossible to feel the texture of the products or have a true idea of the color quality.

According to Chinnici, most area rug vendors are holding steady on their prices. “Price points haven’t gone up in two years. Karastan came down and never went up.” She predicts that manufacturers may start to implement price increases in 2014, but she also notes changes in how business is conducted at the manufacturer’s end, “Karastan now makes an affordable wool rug at almost half the cost of some of their Original collection and Ashara collection.”

In Jasper, Ross‘s greatest competition comes from the big boxes and furniture dealers. “Almost all the furniture stores around here have rugs, and most area rug manufacturers work with the furniture stores to make coordinating collections.”

As at Crest, online sales aren’t a looming threat. This may be attributed, in part, to Dalton Wholesale’s more mature customer base, which still prefers to shop in brick-and-mortar stores.

For the same reason, Ross has had great success with an advertising method that many may assume is outdated: print ads in the classifieds in the local newspaper. Ross makes sure that area rugs are mentioned in any ad that Dalton Wholesale runs. In addition to print, the store uses television, radio and billboards, and it runs a promotion every quarter.

Online sales aren’t hurting Glassman’s business either, though for wholly different reasons. “Online competition is only for inexpensive rugs. A lot of manufacturers now have MAP pricing. That’s where we’ve always priced our rugs anyways, so we are always less expensive or the same price as what customers find online, but our showroom does get used as a shopping area sometimes.”

To disarm those who shop his showroom intending to purchase online, Glassman has turned to private labeling, and he highly recommends it. The tags on his private labeled rugs have no information that could link them to the manufacturer and, instead, bear the Marshall name. Not everything is private labeled, however. Marshall carries Nourison, Oriental Weavers, Dalyn, Kalaty, Feizy—in all a total of 25 manufacturers.

“We’re always looking for something unique,” says Glassman, adding that Surya has done quite a lot of consumer-targeted advertising recently, and it seems to have been successful, as consumers do come in asking for Surya products by name.

Marshall began selling rugs online around 1997 and, reports Glassman, was doing a decent volume there. The company still has a small presence online but now says that the profit margin isn’t worth the hassle of dealing with the competitive marketplace, shipping and returns. “It’s a different industry,” says Glassman. “Leave it to the online professionals who are geared for it.”

Marshall Carpet One and Rug Gallery has as many customers coming in looking for area rugs as it does broadloom, which it attributes to its reputation as a rug store with a wide selection and quality service.

Glassman and his team target the female shopper with ads on HGTV and food channels. They have had a good response to both these television promotions and print advertising. Direct mail campaigns haven’t generated much business for the store.

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